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More access to listings for sale that used to be restricted
to real estate agents has created a prime opportunity for home buyer rebates that could be worth thousands of dollars.
Some real estate agents are now operating on the basis that many home buyers will use the internet
to take a more active role in finding and viewing homes for sale. The time saved by the agent means
they are able to offer a cash rebate to a home buyer.
Most people shop for the best value on products or services, and will take advantage of
specials or discounts in order to save money. Striving to save a few dollars on just about everything, except for
perhaps the most expensive transaction. When selling or buying a home, thousands of dollars are typically spent on sales commissions,
which could otherwise be saved, providing that consumers have access to the right information and the available
options.
Consumer access to the online network of home listings and
research information
has created a more competitive market for alternative real estate
services offering new options for
discounts on home listings, and cash rebates for homebuyers.
Multiple Listing Service
The Multiple Listing Service, or MLS, is a database, or directory of homes that are listed
for sale by real estate brokers or agents. When a home is listed for sale in the MLS, the listing provides the
maximum exposure to real estate brokers and agents that may have clients as potential homebuyers. Specific property
types and detailed information in the database can be quickly located and matched to the criteria of potential
buyers.
Because this directory is so comprehensive, it has become the most powerful marketing tool in the real
estate industry. In many areas, up to 85% of homebuyers first learned about the home they bought, through a listing
in the MLS. More homes are sold through the multiple listing service than by any other medium.
Prior to the Internet, access to the MLS database of home listings was available only
to licensed members, and as a result had limited the alternatives that were available to the traditional listing
and sales approach. Now, with the advent of easy access to this powerful database,
consumers can choose money saving alternatives to the traditional
sales commission.
Alternative Real Estate
As a result of the change in real estate technology, there are a growing number of real estate agents
who are offering services at substantially reduced commission rates. The innovation of alternative real estate services, combined
with easy access to Internet listings and research information, offers consumers the
benefit of money saving
options to choose from.
Another option that is becoming popular is a fee-for-service brokerage, which provides
the unbundling of services for each separate option as needed by the consumer. For example, when a broker is paid
to perform specific services such as, negotiate purchase offers, but not all the other aspects of a full service
broker. The advantage for the consumer is the ability to choose which services are needed for a particular transaction.
The unbundling of specific services can provide lower overall costs, however, the individual services would have
to be compared to other service options to determine the best value. While saving money is usually the primary
goal, consumers should of course also compare the level of service when choosing a real estate broker.
Although real estate commissions are negotiable, and are not fixed by law, the industry
has maintained a commission level of around 6% for a traditional full service listing, but the trend for reduced
sales commissions is picking up speed as more consumers become aware of the options, and as more real estate brokers
adjust to the change in business.
Discount Home Listing
Real estate agents with reduced commissions typically offer two types of home listings: A
flat fee type of listing, which has a fixed flat fee that ranges from about
$500 to $2,500, depending on the level
of broker service and involvement. The other type is a discount listing based on a reduced commission as a percentage
of the sales price, which ranges from about 1% to 1.5% of the final sales price of the home. When compared to a
traditional full service sales commission typically paid to a listing agent, the savings can be very substantial.
The following is an example of a traditional 6% home listing, which is usually split between
the listing agent and the selling agent at the close of escrow.
· $400,000 Sales Price
· 3% Commission to the Selling Broker = $12,000
· 3% Commission to the Listing Broker = $12,000
Here is an example of the savings from a flat fee listing compared to a traditional listing with a 3% commission
paid to the listing agent:
· $400,000 Sales Price
· 3% Commission to the Selling Broker = $12,000
· Flat Fee to the Listing Broker = $500 to $2,500
· Savings Compared to a Traditional Listing =
$11,500 to $9,500
The next example shows the savings from a discount listing based on a percentage of the
final sales price:
· $400,000 Sales Price
· 3% Commission to the Selling Agent = $12,000
· 1% to 1.5% Commission to the Listing Broker =
$4,000 to $6,000
· Savings Compared to a Traditional Listing =
$6,000 to $8,000
Home Buyer Rebate
For homebuyers, many brokers and agents are now offering
home buyer rebates of 1% to 2%
of the final sales price, which can be paid, or credited to the costs of the homebuyer at the close of escrow.
Again, when compared to a traditional full service sales commission paid to a selling agent, the savings to the
homebuyer can be high.
The following is an example shows the potential savings from a
home buyer rebate compared to the traditional 3% selling agents commission:
· $400,000 Sales Price
· 3% Traditional Commission to the Selling Agent =
$12,000
· 1% to 2% Rebate to the Home Buyer = $4,000 to
$8,000
In a typical home buying transaction, the selling broker would receive a 3% commission for their service, and would
rebate the agreed portion of the commission to the buyer when escrow closes. The
rebate can be applied to the buyers
down payment or closing costs, or taken as cash, providing there are no lender or state restrictions, or the amount
of the buyers rebate can be deducted from the final sales price of the home.
For Home Sellers:
Selling Exposure
Statistics can show that up to 95% of MLS listings are not sold by the listing agent,
but are sold by cooperating brokers or agents that show the MLS listings to their clients. The most important aspect
of listing a home for sale in the MLS is the broad exposure to thousands of selling brokers and agents that may
have clients as potential homebuyers. This exposure essentially creates a large commission based sales force with
the goal of selling the homes listed in the MLS database. It generally does not matter to the selling broker whether
the listing commission is discounted or not, as long as the listing offers the usual 3% sales commission to the
broker that sells the home. In a discount listing, the savings to the home seller comes from the listing broker's
reduced commission.
Discount Listing Brokers
As mentioned before, a discount listing broker usually offers their service as either
a flat fee, which could be a required up-front expense, or as a percentage of the sales price, which would be paid
at the close of escrow. In general, the amount of the fee is relative to the type of service that the broker provides
to the seller. An important note about offers for discount listings - some brokers may only offer to place listings
in their own online database as a basic service, however, for maximum selling exposure, the seller should choose
a service that includes the listing in the MLS, which will appear in the Realtor.com database, as a minimum. When
sellers are comparing broker services and fees, there are some suggested minimum services that should be provided.
The discount listing broker's basic service should include the following:
· Input the home listing, including a photo into the MLS database
· Provide information and support about selling procedures
· Assist with all purchase offers and counteroffers
· Provide all the required selling contracts and disclosures
Additional services may be offered for an increased fee, such as:
· Provide a home for sale yard sign
· Hang a lockbox to facilitate showings
· Hold open houses for potential buyers
· Provide additional advertising
· Schedule showing appointments
· Order the necessary home inspections
· Set-up and monitor the escrow and closing process
Each discount brokerage will have their own policy and procedure for the listing services
offered. The home seller will need to decide their own comfort level when choosing the different service options
available.
Taking more control over the process in a discount listing means that the seller could
have responsibilities that the broker would normally have, such as: some of the additional service items as listed
above, or perhaps researching comparable sales to determine the listing price. Also, instead of personal meetings,
discount brokers may provide the necessary information and support, using the phone, email, and fax, as the primary
contact. Home sellers should confirm the specific procedures of their selected broker, and discuss what the seller's
responsibilities will be, to ensure a smooth transaction.
For Home Buyers
Finding a Home to Buy
The primary difference in service when using a discount broker to buy a home is, that
the buyer would do their own house hunting, instead of the broker pouring over listings, and driving around to
show property. In place of personal meetings, the broker may provide the necessary information and support, using
the phone, email, or the fax, as the primary contact. In addition to the prospect of receiving a large cash rebate,
many buyers may find this method of house hunting to be a very comfortable and convenient way to do business.
The process of house hunting has been simplified now that the MLS listings are available
online. Instead of waiting on agents to provide lists of homes for sale, buyers can turn on the computer and find
the homes that meet their criteria. A convenient online search
for listings can provide detailed property descriptions and photos. Some listings even offer a virtual tour, which
is a 360-degree online video presentation showing the room interiors. Homes that match the buyer's desired features
can be researched, mapped, and printed out for reference.
In addition to homes for sale, buyers can also find helpful research information, which provide details of various places to live, including: the costs of living,
crime statistics, education, economy, health and climate. A cost of living feature can compare two cities in various
categories such as, taxes, housing, food, and other costs. A salary calculator can project what a buyer's salary
should be to maintain the same standard of living for a different location.
New Home Developments
The home buyer rebate may apply to some new home developments, depending on the builder's
policy for cooperating with brokers. Before visiting the model homes, or the sales office, the buyer can call the
builder and ask if they work with real estate brokers, or if they offer a broker co-op. If the builder does, they
will probably require the buyer's broker to be with them on their first visit. The agent may be able to accommodate
a meeting with the buyer at the sales office to satisfy the builder's requirement.
Viewing Homes
The procedure for viewing homes can vary depending on the policy of the
discount broker. A common
way is for the buyer to call the listing agent to schedule an appointment, and let them know that they have an
agent, but they are not available to show the home. The listing agent should not object to showing the home
to a potential buyer, since they are paid a commission to sell the home.
Other brokers may offer to schedule appointments for the buyer, or perhaps even meet the
buyer at the property. The buyer will need to consider their comfort level for scheduling their own showing appointments
when they are choosing a broker, and discuss the procedure.
Each listing in the online database should provide the contact information for the listing
agent in order to schedule an appointment to view the property. If the listing does not provide the property address,
the buyer can contact the listing agent, or their broker for the information.
If you don't have a real estate broker to
work with, another option is to ask the
listing agent if they will rebate a percentage of their selling commission if
they were to also represent you as the buyer's agent. Most agents should be willing to work with you since they would be earning a
sales commission, in addition to the listing commission that the seller pays them.
The rest of the buying process should be mostly standard procedure, such
as, having your broker submit offers, negotiate terms, provide required
disclosures, guidance, and support. |
